Business Directories

Dubai optimistic; may sell stakes in key firms

Dubai, November 28, 2010

Dubai may sell off stakes in state-owned companies, top financial officials said on Sunday, as the emirate tries to dig itself out of its enormous debt pile.

The emirate, a regional financial and trade hub, suffered a blow to its reputation a year ago when state-linked conglomerate Dubai World announced it would ask creditors for a standstill agreement on almost $25 billion in debt.

'Dubai World is now on a sound financial footing,' Sheikh Ahmed bin Saeed Al-Maktoum, chairman of the Dubai Supreme Fiscal Committee, told reporters.

Sheikh Ahmed was joined at the news conference by Dubai's other top financial authorities and, apparently underscoring their solidarity, by Dubai's ruler, Sheikh Mohammed bin Rashid Al-Maktoum. He did not speak, but occasionally tapped on an iPad tablet computer.

Later, when asked by reporters whether he was hopeful over Dubai's restructuring, the Dubai ruler said: 'I am optimistic.'

Since the crisis, Dubai World has managed to reach a restructuring deal with creditors, allowing the government to tap into improved investor confidence to issue a $1.25 billion bond in September.

Sales of gas-guzzling sport utility vehicles and luxury cars are up again, and tourists are returning, but many construction plans are on hold and properties are still lying empty.

Dubai's economy grew 2.3 percent in the first half of this year, the government's statistics office said earlier this month. The IMF says Dubai's economy likely contracted 0.9 percent in 2009, although no official figures for the full year of 2009 have been released.

'Dubai's real economy seems to be on the mend,' said Tristan Cooper, head analyst for Middle East sovereign at Moody's.

'However, the main cloud on the horizon is still the emirate's large debt overhang. Despite the recent restructuring of Dubai World's debt, the emirate faces substantial annual debt maturities.'

As Dubai's state-linked companies try to dig out of an estimated $100 billion-plus in debt, they have been able to reassure investors and creditors facing debt restructuring by reminding them that Dubai's successful, tightly-controlled companies could be sold to raise cash.

Prized stakeholdings in assets such as DP World, Emirates Airlines and Dubai Electricity and Water Authority (Dewa) are attracting keen interest from potential investors.

'We are working on opening up the capital of leading companies to our public,' Sheikh Ahmed said.

At the same time, Dubai has shown a clear reluctance to sell off its crown jewels, even as some $30 billion worth of loans and bonds at predominantly state-linked firms are due to mature in 2011-2012.

'Asset sales are not on the cards... we are reluctant to sell assets at this time,' said Mohammed Ibrahim Al-Shaibani, deputy chief of Dubai's fiscal committee.

'A privatisation plan is a possibility... (it) may be used as a possibility of raising funds in the future,' Shaibani said without naming any specific companies.

Rami Sidani, Schroders Middle East head of investment, said that investors had been waiting for more listings after Dubai World unit DP World was floated in 2007.

'Investors would like to see Dubai's successful companies like Emirates Airlines, Dubai Duty Free, Jumeriah Group in the market,' Sidani said.

State officials also raised the possibility that Dubai could raise more funds through debt issues. Dubai World's flagship property developer Nakheel plans to issue a sukuk, or Islamic bond, to its trade creditors in the first quarter of 2011, said a senior official at the Investment Corporation of Dubai (ICD), which controls some of the state's assets. -Reuters